Year End Closing Process

Year End Process

Use the following checklist as a guideline to perform year-end processing in Oracle General Ledger for your ledgers.

Set the status of the first accounting period in the new fiscal year to Future Entry.

Note: It is advisable not to open the first period of the new fiscal year until all of the year-end processing for the last period of the current year has completed.

§  (Optional) If you are required to have an actual closing journal entry that shows the closing of your income statement accounts to retained earnings, submit the Create Income Statements Closing Journals program. This program creates an auditable closing journal entry.

§  (Optional) If you submitted the Create Income Statement Closing Journals program, post the closing journals to update account balances. Your income statement will reflect zero balances.

§  (Optional), Submit the Create Balance Sheet Closing Journals program. Post the Balance Sheet Closing Journal. Your balance sheet will now reflect zero balances.

§  Close the last period of the fiscal year and Open the first period of the new fiscal year using the Open and Close Periods window.

§  Opening the first period of a new year automatically closes out your income statement and posts the difference to your retained earnings account specified for your ledger in the Accounting Setup Manager.

§  Note: If you have already run the Create Income Statement Closing Journals program, where the closing account specified was the retained earnings account, opening the new fiscal year has no further impact on retained earnings because the income statement accounts now have zero balances.

§  In the first adjusting period of the new fiscal year, reverse the balance sheet closing journals to repopulate the balance sheet accounts. Post the generated reversing journals.

Income Statement Closing

General Ledger provides two options for the Income Statement Closing Journals. You can choose to zero out each income statement account, and post the balance to the retained earnings account. Alternatively, you can post the reciprocal of the net income balance to an income statement offset account instead of zeroing out each revenue and expense account.

The Income Statement Closing Journals program generates journals to close out the year - to - date (YTD) actual balances of a range of revenue and expense accounts. The Income Statement Closing Journals program can accept two account templates as parameters for the closing journal.

The Retained Earnings account template

The Income Statement Offset account template

The Retained Earnings account template is a required parameter. The Income Offset account template is an optional parameter.

Option 1: Income Statement Close

When you run the process, Create Income Statement Closing Journals, and you enter an account for the field, Closing Account in the Parameters window, entries are posted against each revenue and expense account in the account range processed. It is the reciprocal of the account's YTD balance and zeroes out each account. The amount posted to the retained earnings account is effectively the net sum of the revenue and expense accounts' YTD balances.

If there are income statement balances in both the ledger currency and entered currencies of a ledger, the closing process produces a journal batch that contains separate journals for each currency processed. For the ledger currency, the journal will only have entered amounts as converted amounts do not apply. For entered currencies, the journal will have both entered and converted amounts.

Stat account balances are not processed by the program.

Option 2: Income Statement Offset

When you run the process, Create Income Statement Closing Journals, and you enter an account for the fields, Closing Account and Income Offset Account in the Parameters window, the journal generated will be similar to that described above except for the following:

The revenue and expense accounts included in the specified account range will not be zeroed out. Instead, the program will take the net sum of the revenue and expense accounts. This sum includes the balance in the income statement offset account. It will then post the reciprocal of the net sum to the income offset account, in the appropriate debit (DR) or credit (CR) column.

The amount posted to the retained earnings account will be the reciprocal of the amount posted to the income offset account. This retained earnings amount will then also be equal to the net sum of the revenue and expense accounts processed.

Runà Create Income Statement Closing Journals

Before running the process, Create Income Statement Closing Journals, review the following activities for the ledgers you plan to close. If you use reporting currencies (journal and subledger level), review the following activities for the reporting currencies you plan to close.

ü  Post all revenue and expense adjustment entries to the appropriate periods.

ü  Print General Ledger accounting and analysis reports.

ü  Ensure the period you are closing is an Open period.

ü  If you have accounts you want to process that have any of the following attributes:

ü  Enabled flag was disabled

ü  Allow Posting flag was disabled

ü  Effective date is out of range

Temporarily re-enable the account to post the generated closing journal. The Segment Value Inheritance program can help you temporarily re-enable these accounts. Use the Segment Value Inheritance program to disable these accounts once the closing journal has been posted.

1.    Run the close process, Create Income Statement Journals in the adjusting period that represents the last day of your fiscal year or the period you want to close for your ledger or ledger set.

2.    In the Parameters window, enter an account in the Closing Account field. The Category field below defaults to display Income Close.

3.    If you are closing a period and you entered an account for the Closing Account and Income Offset Account fields in the Parameters window, submit your request to generate closing journals. The category field below defaults to display Income Offset.

4.    Post the income statement closing journals to update year-to-date actual balances or period to date actual balances. If you chose the Income Statement Offset option, proceed to your next open period.

Note: Should you need to make adjustments for your ledger after their income statement closing journals are posted, reverse and post the original closing entries, make your adjustments, then rerun the closing process to capture the new adjustments for that ledger.

5.    Run the Open Period program to open the first period of the new fiscal year. This program closes out all revenue and expense accounts to the Retained Earnings account. However, because posting of the closing journals has already zeroed out the revenue and expense accounts to the Retained Earnings account, there are no balances to transfer and no further effect on Retained Earnings.

6.    If revenue and expense adjustments need to be made after opening the new fiscal year for your ledger, posting those back - dated adjustments will automatically update the beginning balances of the Retained Earnings account for all open periods in the New Year. However, amounts in the closing journal will not reflect the adjustments. For accuracy, you must reverse the closing journals, post, enter your adjustments, run the Create Income Statement Closing Journals, and post for your ledger.

Balance Sheet Closing

When you run Create Balance Sheet Closing Journals, journal entries are created to reverse debits and credits of ending year-to-date actual balances for the period you want to close. The balance, which is the net of the reversed asset and liability accounts, is transferred to the closing account you specify.

Note: Your balance sheet should be balanced if you completed the Close Process: Create Income Statement Closing Journals to update the retained earnings account. If the range of balance sheet accounts is balanced, then there is no transfer of balances.

Before running this program, review the following activities for the ledgers you plan to close.

Create an accounting calendar that includes two adjusting periods: one for the last day of the fiscal year you are closing, and one for the first day of the new fiscal year. This does not affect account balances in periods used for reporting.

ü Post any adjustment entries to the appropriate periods.

ü Print General Ledger accounting and analysis reports.

ü Ensure the period you are closing is an Open period.

RunàCreate Balance Sheet Closing Journal

1.       Run the close process, Create Balance Sheet Closing Journals in the last adjusting period of the fiscal year you want to close for your ledger or ledger set.

Note: If you want to run the close process for your primary ledger and the associated secondary ledgers simultaneously, create a ledger set that contains all of the ledgers. Then run the close process for the ledger set so that they can all be processed from a single submission.

2.       Post the balance sheet closing journals to zero-out balance sheet account balances.

Note: Should you need to make adjustments for your ledger after their balance sheet closing journals are posted, reverse and post the original closing entries, make your adjustments, then rerun the closing process to capture the new adjustments for that ledger.

3.       In the first adjusting period of the new fiscal year, reverse the balance sheet closing journals to repopulate the balance sheet accounts.

4.       Post the generated reversing journals.